When considering security and finance, we typically consider regulations like PCI DSS, SOX, or FINRA. But if you’re a company doing business in Europe, there’s another framework you need to consider–GDPR. This set of regulations not only governs the exchange of consumer data but also has a massive impact on how financial organizations navigate commerce in the EU and across borders.
Here, we’ll cover some basics financial institutions might want to consider when adopting GDPR requirements.
The Significance of GDPR for Financial Institutions
GDPR is crucial for any company doing business in the EU, and this is just as true for financial institutions. Additionally, because these institutions have other requirements around collecting personal information for a variety of reasons (verifying identity, authentication, etc.), they have several ways in which they will have to understand GDPR. These facts–and the potential for theft–are why the financial sector has serious challenges around identity fraud and data management.
Compliance with GDPR can aid in mitigating these issues… but it also impacts several other areas where these institutions may gather data:
- Data Minimization and Accuracy: Institutions must ensure that only necessary data is collected accurately and up-to-date, including verification, marketing, and transfers.
- Consent and Transparency: Clear consent must be obtained for data processing, and customers should be informed about how their data is used.
- Data Protection by Design and Default: This principle mandates that data security is integral to all technology solutions.
- Rights of Data Subjects: Financial institutions must be equipped to handle customer rights under GDPR, such as access to their data, the right to have their data deleted (the right to be forgotten), and the right to data portability.
Cybersecurity Challenges in Financial Institutions under GDPR
Financial institutions traditionally face many cybersecurity threats, from phishing to APTs and outright hacks, due to the nature of their business and the information they gather. Unsurprisingly, GDPR significantly impacts these organizations and how they do business.
Under GDPR, financial institutions must implement stringent security measures to protect customer data. This has significant implications for their cybersecurity strategies:
- Data Protection by Design: Data protection must be built into an IT system from the outset, no matter what, rather than as an add-on or secondary concern.
- Breach Notification Requirements: GDPR requires that data breaches likely to result in a risk to the rights and freedoms of individuals be reported to the relevant supervisory authority within 72 hours of becoming aware of it.
- Risk Assessment and Management: Financial institutions must regularly conduct risk assessments to identify vulnerabilities and mitigate any risks that emerge from those assessments.
Challenges in Implementing Cybersecurity Measures under GDPR
It’s not simply a matter of aligning basic security controls with GDPR that will help these institutions be effective. It requires a balance of privacy, security, and availability for users while also looking to the future of what customers and EU regulations will expect from security. This, and the fact that security threats evolve daily, makes compliance a significant challenge for these businesses.
Some of the more prominent challenges include:
- Integrating Advanced Security Technologies: Institutions must integrate encryption, intrusion detection systems, and (more recently) more advanced technologies like AI-based threat detection tools.
- Managing Third-Party Risk: Financial institutions often rely on third-party vendors for web management, security, document handling, etc. These vendors must comply with GDPR just like the primary organization.
- Continuous Monitoring and Improvement: Cyber threats are constantly evolving, requiring financial institutions to monitor and update their security measures continuously.
- Employee Training and Awareness: Human error remains among the most significant cybersecurity risks. Training employees to understand the importance of GDPR compliance and cybersecurity best practices is crucial.
Implementing GDPR Compliance Strategies
Financial institutions face the dual challenge of adhering to GDPR while safeguarding against cyber threats.
To better align with effective GDPR strategies, financial institutions must align with:
- Data Handling: Financial institutions must only collect the minimum necessary data for their operations, a metric that may be up for debate in the industry.
- Data Subject Rights Fulfillment: These institutions must also field support teams that can respond to financial and customer inquiries and data rights requests such as data disclosure and deletion.
- Requirements for Data Protection Officers (DPOs): Appoint or hire qualified DPOs, especially for institutions engaged in large-scale monitoring or processing of sensitive data.
- Leveraging Technology for Compliance and Security: Current techniques like advanced perimeter security and encryption are absolutely necessary. But, organizations may also look to advanced tools like AI-powered mitigation and analytics software.
- Performing Security Audits and Compliance Checks: Conduct comprehensive security audits to identify vulnerabilities in data protection. Perform regular compliance audits to ensure all processes and technologies align with GDPR requirements.
- Employee Training and Awareness Programs: Employees must be trained on requirements. Specifically those not disclosing private information via transactions or customer service.
GDPR and Cross-Border Data Transfers
GDPR addresses cross-border data transfers, including those related to financial transactions, primarily through its provisions on international data transfers. Here’s a summary of the relevant aspects:
- Adequacy: Institutions can transfer data outside national boundaries if the recipient nation has protections considered adequate by EU and GDPR standards. This adequacy decision is based on the third country’s domestic law and EU requirements.
- Appropriate Safeguards: If there aren’t adequate controls, GDPR allows data transfers to third countries if proper safeguards are in place. These can include binding corporate rules or other contractual agreements.
- Exceptions in Specific Situations: GDPR also provides certain exceptions, such as when individuals provide permission for the transfer or if there is an explicit public interest.
Understand Everything You Need to Know About GDPR with Lazarus Alliance
If you’re a financial institution working with international customers, you’re most likely juggling several layers of compliance. Don’t let GDPR be the one that gums up your operations. Trust Lazarus Alliance.